It's one of the great underreported stories of our time: the rate at which the world's population is growing has actually slowed by more than 40% since the late 1960s. What's more, the number of people in the world could actually start to decline over the next 60 years, according to the United Nations Population Division. Under this scenario, the world's population, now 6.8 billion, may peak at 9 billion by 2070 and then start to diminish. Long before then, some nations' populations will already be shrinking, as the world's fertility rate falls below replacement levels, which is 2.1 children per family. We consider these population trends a social change with potentially profound repercussions for the global economy. These trends are important because, as has often been observed, demographics is destiny. We think that demographics especially influences destiny in this way: when a nation has more working-age adults than it has elderly adults, its economy tends to grow at above-average rates. Conversely, when a nation has a large number of seniors relative to working-age people, its economy tends to be constrained. So, contrary to popular stereotypes, the world's biggest demographic problem over the next 40 years is unlikely to be overpopulation, but the opposite: a decreasing (and aging) population, which presents complicated and subtle quandaries of its own. And as the world ages, the economic prospects are likely to be brightest for those nations aging the most slowly. Age Distribution Matters In studies such as Economic Growth and Demographic Transition, published by the National Bureau of Economic Research, it's been shown that the way the population of a nation is distributed across different age groups can have a great impact on that nation's economic performance. For instance, nations with a high proportion of children are likely to devote a high proportion of public and private money to their care, which may gladden the hearts of parents but tends to depress the pace of economic growth. In contrast, if most of a nation's population is of working age, productivity tends to rise, producing what's called a "demographic dividend" of economic growth. If favorable public policies are in place to promote business competitiveness, an ample working-age population can create virtuous circles of wealth for a nation. However, if a large proportion of a nation's population consists of seniors, the effect can be similar to that of a nation with lots of children: a large share of public and private resources are allocated to a relatively less productive segment of the population, which in turn tends to dampen economic growth. For nations, population growth per se is not as important to economic growth as the ratio of workers to seniors. In fact, in China and India a declining rate of population growth has contributed to their own much-chronicled economic success story of the past 15 years. What helped both China and India was the multitude of workers relative to the number of seniors. When the fertility rate of China and India fell, legions of people born previously were working, [...]

The bond markets proved their resiliency in 2009, recovering dramatically from both a severe credit crisis and a deep economic recession. In a recent panel discussion, three of T. Rowe Price’s senior bond managers outlined what changed in 2009 and where the market may be heading in 2010. The panel included Steve Huber, manager of the T. Rowe Price Strategic Income Fund; Mark Vaselkiv, manager of the T. Rowe Price High Yield Fund and a 21-year veteran with the firm; and Mike Conelius, also a 21-year veteran with T. Rowe Price and manager of the T. Rowe Price Emerging Markets Bond Fund. How the Bond Market Turned the Corner Bond markets rallied in 2009 after investors nearly abandoned higher-yielding groups–corporate bonds, high-yield bonds, and emerging market bonds–during the crisis of 2008. As many altered course, the global bond market experienced one of its best annual performances. Treasuries struggled, however, hampered by low yields and fears about inflation. Several key events helped produce this fast-paced recovery: • Fed efforts to improve market liquidity proved largely successful. Many companies issued new bonds, providing an attractive stream of new opportunities for investors. • As the economy stabilized, investors became more willing to take risks and look for possible bargains. • [...]

To Tweet or Not to Tweet?

Computers and similar electronic miracles enable instant worldwide communications have revolutionized our civilization. There is little doubt that the advances in communications have facilitated the transmission of financial information and, thereby, made all of us involved in the financial world better able to contact our clients to provide our thoughts on developments in the marketplace. At the same time, these advances in communication present challenges in assuring that the information provided is accurate, complete, and in compliance with the plethora of laws, regulations, and corporate rules applicable to modern business in the financial-services world.

Since the Internet has become so universal in its use, legislators, lawyers, and the courts, as well as regulators and compliance personnel, have wrestled with the proper place of the communications revolution in the world of financial services. The so-called "social networking" facilities that have been developed in the past few years have made this challenge even more daunting. For years we have worried about the use of personal computers--particularly the more-mobile ones--to subvert the various rules applicable to sales communications between financial planners and their clients. We first developed concern with the use of "free-form" software for life insurance illustrations. As the genre has expanded, we grow ever more wary about how much latitude should be available with these new communication tools--particularly since many social-networking services have spotty or nonexistent archiving capabilities.

Lawyers and the courts have had great difficulty coping with the evidentiary requirements posed by the Internet in general. Dealing with social networking in evidence is still a developing area of the law. It is pretty well settled that e-mail communications are admissible in evidence, subject only to the generally applicable rules of evidence. Judges have long required litigants to provide adverse parties with "relevant" e-mail files in pretrial or pre-arbitration discovery. These requirements presume that e-mail files are, in fact, maintained. The difficulty arises over the word "relevant." Determining what is relevant becomes a particularly difficult task in the spam-infested Internet world and is exacerbated by the availability of multiple e-mail addresses. Many investment advisory and brokerage firms have installed complicated software to archive e-mail communications so that messages can be made available for litigation and regulatory purposes. These software packages, in order to accomplish their goals, must restrict business e-mail to business purposes and must have sophisticated spam filters to separate the "relevant" business communications from the junk. Otherwise, the e-mail files would be useless because of their very volume. Despite these well-established rules, we see regular reports of litigants being sanctioned because "lost" e-mail files containing embarrassing admissions were "found" that had not been provided to the opposing parties.

FINRA appears to have liberalized sales communication rules with respect to social-networking applications like Twitter. The distinction seems to be whether such a social networking application is used for real, spontaneous communication like what would be contained in a telephone call or it is used as a true sales presentation. Obviously, the difference is in the eye of the beholder, with no clear boundaries. Lawyers and compliance officers will cringe at the thought of being presented with copies of social-networking communications during arbitrations or at trial when it is the first time they have seen them. There is a dramatic difference between someone relating the substance of a telephone call in oral testimony and someone presenting an exact copy of a written social networking communication. Either form of communication may include difficult admissions, but there is a much stronger "truth" in the written communication than there is in an oral recollection of a telephone call.

The easiest way to avoid this problem is to forbid business communication via social networks. If we keep business communications to business formats and business Internet sites, we can have a much better chance of controlling what is said and of being sure that we know for sure what embarrassing information may be in existence. We recognize that social networking is the communication method of choice for a large segment of our society--particularly among the younger generations. Nevertheless, the potential for abuse and for unpleasant surprises is so great that we question whether the business use of social networking is worth the risk. That being said, making a broad prohibition work in the real world may be easier said than done, particularly when many people use these forms of communication without thinking. Moreover, policing social networking communications may be virtually impossible without new technology that can give broader access and permanence to this presently ethereal technology.

Regardless of the decision that the management of advisory and brokerage firms may make regarding the use of social-networking facilities for business communications, it is necessary for everyone in the financial-services industry to be aware of the technology, the risks involved and the uses to which our people put this new communication development. Rules need to be established and to be enforced.